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Heartland Institute: Patent Trolls Mean Big Damage for US Economy

Though there's a little less heard about it these days, there's still a major problem facing a lot of technology-related industries in the United States, specifically, the concept of intellectual property abuses. The biggest perpetrators of such abuse, according to some, are the so-called “patent trolls,” otherwise known as “non-practicing entities,” those who hold patents, but do little with said patents other than file lawsuits against businesses who do anything similar to the patent itself. A new study from the Heartland Institute, meanwhile, shows just what kind of damage these “patent trolls” can do.

The policy brief released from the Heartland Institute, titled “Why Patent Reforms Are Needed: Intellectual Property Abuses Threaten Innovation and Cost Consumers Billions,” notes that there's a certain balance that needs to be struck between patent holders and those who would use patents. Particularly, the report notes that certain entities like universities should never be classified as “patent trolls” simply because said entities hold patents but don't pursue same. But the report also notes that there are means to strengthen patent law in a fashion that helps weed out patent trolls, particularly what's known as “loser-pays” provisions, in which those who lose a lawsuit must pay legal fees for all involved. This is projected to not only filter out the trolls, but also give an extra boost to those with legitimate concerns.

The study's results, however, provided even more pause, noting that in 2013, nearly 6,500 patent lawsuits were filed in the United States, and suits from so-called patent assertion entities (another name for non-practicing entity) accounted for 67 percent of that number. That's up from 28 percent just five years prior, and the median damages award in 2013 was $4.3 million. What's worse, in just 2008, the American Intellectual Property Law Association noted the median cost of defending against such a suit to be around $600,000 where less than $1 million was at stake. For major patent cases, the average cost is measured around $5 million. Just to top it off, frivolous patent litigation is said to cost businesses $29 billion in direct costs, and $80 billion in indirect costs.

To counter against this, the Heartland Institute offered specific recommendations, starting with changes to the United States Patent and Trademark Office to reflect the changing nature of patents, particularly software patents, and more use of the Trans-Pacific Partnership and Transatlantic Trade and Investment Partnership to help dial back examples of what's called state-sponsored patent trolling, in which governments get involved in patent issues. Lastly, regulatory bodies like the Federal Communications Commission should reduce reliance on patented technology to establish standards, which leads to things like the ATSC standard issues, in which a license becomes overpriced.

Patent trolling can be a serious problem. It restrains innovation and causes companies to divert resources away from developing, testing, and marketing new products that could prove useful or enjoyable to everyday users everywhere. The numbers alone suggest a bigger problem afoot than any might have liked to see, and so, some measure of reaction is called for here. We must be careful, of course, not to overstep our bounds—better a dozen guilty go free before one innocent is falsely penalized, after all—but there's clearly a problem afoot that needs addressed.

Only time will tell exactly what measures, if any at all, are taken against the growing problem of patent trolling, but it's a safe bet that something will be done before too much longer has passed. There's too much at stake, after all, to not.